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Are we protected enough?

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At least 988 million Indians–more than the population of Europe and 75% of all Indians–are not covered by any form of life insurance, and an Indian is assured of only 8% of what may be required to protect a family from financial shock following the death of an earning member, according to our analysis of government data and industry data.

Unexpected shocks such as the death of a family member lead to financial loss. The lack of adequate cover in these situations makes people prone to high financial instability. This is more severe in the case of the unorganised sector: Informal workers in the unorganised sector are exposed to additional risks in the form of income volatility, hazardous workplace conditions and lack of old-age benefits. These risks can be reduced through insurance.

With 82% of India’s workforce engaged in informal employment in the unorganised sector, 392.31 million workers and their families–more than the population of United States–live under constant threat of financial setbacks due to insufficient or non-existent coverage.

India had about 328 million life insurance policies in 2017, according to data from the Handbook on Indian Insurance Statistics, 2016-17, of the Insurance Regulatory and Development Authority of India (IRDAI). Assuming each policy corresponds to a unique citizen, this accounts for 25% of the population having life insurance cover, leaving 75%–or 988 million Indians–without cover.

Considering a person may hold more than one such policy, the number of Indians not covered by life insurance may be higher. Currently, there are no data on the number of unique Indians with life insurance cover.

Further, an average working person is assured of, as we said, only 8% of what may be required to protect a family after the death of an earning member, according to our analysis of data by leading global reinsurer Swiss Re. This is much lower than the insurance coverage adequacy of 44% in Japan, 84% in Taiwan and 67% in Australia.

“There are low levels of insurance penetration (life and non-life) despite numerous sources of risk such as rainfall (leading to income shocks in largely agrarian segments of the population), health shocks, and catastrophes such as floods or cyclones,” the July 2017 Household Finance Committee report of the Reserve Bank of India (RBI) pointed out.

Read the full article here.


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